A recent decision handed down by the Federal Court of Australia has sent shockwaves through the business community, and most relevantly, employers who believe they have employed staff as casuals. This decision could see casual employees now becoming entitled to part-time or full time employee benefits.

WorkPac Pty Ltd v Skene [2018] FCAFC 131 was handed down by the Full Federal Court on 16 August 2018. The case involved an entitlement to annual leave under the Fair Work Act for an employee who had worked as a “casual” for approximately four years.

WorkPac Pty Ltd (“WorkPac”) operated a labour-hire business and employed Mr Skene as a fly-in, fly-out dump-truck operator, from 2010 to 2014, at coal operations in Queensland. Upon the cessation of his employment, Mr Skene claimed that he was a permanent full-time employee of WorkPac and as such, he was entitled to annual leave and other entitlements a full-time employee is entitled to, as provided in the National Employment Standards (and as set out in sections 87 and 90 of the Fair Work Act). WorkPac argued that Mr Skene was in fact a casual employee as defined in their employment agreement and enterprise agreement, and as a result, was not entitled to annual leave and the related entitlements he claimed.

The Full Bench found that Mr Skene was entitled to accrued annual leave of $6,700.00, and further, that Mr Skene was also entitled to $21,000.00 in compensation. Significantly, The Court also set a future date for the Court to decide if WorkPac will be fined for their failure to pay Mr Skene permanent employment entitlements and as such their breach of the Fair Work Act – it is not yet over for WorkPac.

So the question posed is, I am an employer should I worry about this? Simple - this case may leave employers and businesses open to claims from ‘casual employees’, for entitlements reserved for part-time or full-time permanent employee’s only. Further, employees have six years to make these claims, and as such, business owners and employers may be hit with claims from employees who were terminated (or left) the business years ago.

The National Employment Standards, modern awards and enterprise agreements – can’t I rely on the definition of ‘casual’ in the award or agreement?

The National Employment Standards (“NES”) set out the minimum standards that apply to the employment of employees, and importantly, provide for the payment of annual leave, sick leave, and other part time or full-time benefits. The NES standards cannot be displaced, meaning, an employer cannot “contract out” of these minimum standards.

The NES were relevant in this case as the applicable award and enterprise agreement that covered Mr Skene had attempted to define a casual employee through the use of their agreements. Prior to this case, this approach was widely accepted.

The Court however found differently. The Court found that modern awards and enterprise agreements were not the appropriate place to define whether an employee was ‘casual’, and as such, whether an employee is in fact casual will fall on the legal definition as defined by case law.

How is a casual defined (and can an employer define who is a casual)?

The Court recognised the difficulty in identifying how the term ‘casual employment’ is currently defined. The phrase ‘casual employee’ is not defined in the Fair Work Act, and as such, the Court was required to turn to previous caselaw and the indicators of a ‘casual employee’. The Court repeated that the following features are indicators of a casual employee:

1. Firstly, the Court referenced that the term ‘casual employee’ has no precise meaning. The Court reiterated that the question of whether any particular employee is a casual employee, depends on the objective characterisation of the nature of the particular employment as a matter of fact and law, having regard to all of the circumstances [159]. This means whether an employee is actually a casual will be determined on a case by case basis;

2. The features of informality, uncertainty and irregularity of employment indicate casual employment [162];

3. A casual employee will not have any commitment from the employer for continuing and indefinite work, according to an agreed pattern of work [172];

4. Likewise, a casual employee will not give any firm commitment to the employer of continuing and indefinite work [172]; and

5. Other caselaw have identified irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability as indicia of casual employment [173].

The Court also referenced the fact that if a worker meets the definition of a full or part-time employee, they are not required to be paid a casual loading. If, however, an employee elects to pay a worker casual loading, the mere fact of this payment does not automatically render an employee as casual. This means that, even if you are paying an employee casual loading (because you have deemed them as casual), you may still be required to pay the said employee full or part-time entitlements – a double dipping on the employee’s behalf.

What do I need to do?

Following the findings of this case, it is an extremely important time to review the structure and employment of your current workforce. In particular:

1. Review your current employment agreements and ascertain if the agreements reflect the employment status of each staff. It is common for staff members to commence as casuals, and as time progresses, their role shifts into that of part-time or full-time employment;

2. Question yourself:

a) Are you only relying on the definition of ‘casual’ in the relevant award or enterprise agreement when defining the employment of your staff?

b) Is there a mutual commitment between yourself and a casual staff member, for ongoing employment?

c) If you have classified an employee as casual, do they have irregular work patterns, with uncertainty, discontinuity, intermittency of work and unpredictability?

d) Do you or your employee believe or know that they are casual?

If you have casual employees and the findings of this case have you concerned, you should contact us to seek advice on whether your casual employees are in fact casual, and how careful contract drafting may assist to avoid staff members ‘double dipping’ or making a claim against you for further entitlements.